Era of squeezing partsmakers on price is over

Paul McVeigh

The era of automakers squeezing every last cent in cost reductions from suppliers is over, speakers told the Automotive News Europe Congress last week. The industry crisis has changed the "rules of the game" and suppliers are now more willing to refuse potentially unprofitable business from automakers, delegates heard during a panel discussion.

BILBAO, Spain -- The era of automakers squeezing every last cent in cost reductions from suppliers is over, speakers told the Automotive News Europe Congress here last week.

The industry crisis has changed the "rules of the game" and suppliers are now more willing to refuse potentially unprofitable business from automakers, delegates heard during a panel discussion.

Alfredo Altevilla, CEO of Fiat Powertrain Technologies and a Chrysler Group board member, said the crisis had led to a more cooperative way of thinking within automakers.

"They realize that squeezing suppliers is not the best way to get access to technology or value creation," he told the Congress.

Ignacio Martin, CEO of CIE Automotive SA, said automakers had asked his company to rescue suppliers that were in danger of collapse during the crisis. "I never thought I would see that day," he said.

He said that following requests from automakers CIE acquired ACS Group, a maker of panoramic roofs, and CIE Compiegne, which makes common-rail diesel components, to ensure there were no supply interruptions.

William Kozyra, CEO of TI Automotive, said that the crisis had caused automakers and suppliers to understand that they need to cooperate to survive.

Kozyra urged automakers to involve suppliers at an early stage during the development of new products. About 70 percent of costs are locked in at the design stage and if suppliers are involved early, they can "design in" cost reductions that will bring benefits for decades to follow, he said.

Ask whether their companies had turned down potentially unprofitable business during the crisis, the CIE and TI executives said yes.

"Absolutely," said Kozyra. "One automaker asked us to do something that had only value for them and no value for us. They were upset when we said no, but we were clear that it was not worth our while."

Martin said companies in China especially tried to take advantage of the crisis to gain price reductions, but his company did not take on possible money-losing contracts.